The House of Representatives passed the Jumpstart Our Business Startups (JOBS) Act in overwhelming bipartisan fashion (390-23). The JOBS Act is a package of six bills, four of which had already passed the House, and all of which would lift or relax Securities and Exchange Commission rules. The bill is intended to make it easier for small businesses to go public. But as the Washington Post’s Ed O’Keefe notes, “despite its name, Republican leaders couldn’t say how many jobs the bill would help create.” Why? Because cutting red tape doesn’t address the fundamental plight of the U.S. economy: a deep and prolonged aggregate demand slump.
As of Jan. 2012, the U.S. economy had fewer jobs than in Jan. 2001. More than 11 million jobs would be needed to return the unemployment rate to its pre-recession level (5.0 percent). Full employment would not be reached until 2019 if January’s pace of hiring (243,000 jobs added) continues. And the February employment report—due out tomorrow—is projected to show a deceleration in hiring. As of the fourth quarter of 2011, actual economic output fell $883 billion (5.4 percent) below potential economic output. Mass underemployment and a gargantuan output gap can’t be chalked up to red tape—this affliction is the byproduct of the housing market imploding (dragging down with it personal consumption and real estate investment) and fiscal contraction at the state and local level.